Oil is once again showing how sensitive it is in regards to the coronavirus, and as the number of cases continue to grow in the US and elsewhere, some say the price may once again tumble as demand reduces.
In the United States, infections have surged in many states with Florida reporting a daily increase of more than 15,000 new cases over a 24 hour period, which is the highest number recorded by any state.
The governor of California has also ordered most of the state back into lockdown again as the number of hospitalizations soar due to the virus which means the reclosure of restaurants, cinemas and many other establishments which is going to hit the economy hard.
The market is also worried about the growing tensions between the US and China with the EU now jumping into the fray. The European Union is now following in America’s footsteps and said it is introducing counter measures against China in response to Beijing’s new security law on Hong Kong which they say impacts on people’s freedoms.
America has already sanctioned some Chinese officials over the country’s treatment of Uighur Muslims and China has now promised swift retaliation.
OPEC and allies including Russia, which is known as OPEC+, are expected to reduce production cuts to 7.7 million barrels per day when they meet this week noting stronger demand, which has led to a substantial recovery in the price.
Some analysts are a bit skeptical of OPEC’s move to increase production at a time when the coronavirus is reappearing in a big way, and say that the best way to keep the oil price stable would be to extend the production cuts currently in place.
“That seems a quite risky option, with the safer being a one month extension. It may be time to brace for volatility once again,” said Edward Moya, senior market analyst at OANDA in New York. “The (OPEC+) cut was crucial to stabilizing oil prices.” he added.
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